Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
A doctor with a chart

Life Health > Annuities > Fixed Annuities

4 Ways the Annuity Sales Process Is Broken

Your article was successfully shared with the contacts you provided.

What You Need to Know

  • The products are all different.
  • Plugging the products into planning systems is hard.
  • Plugging the products into post-sale tracking and service systems is also hard.

The insurance industry has been working to raise awareness around annuity products for more than a decade now.

The goal: educate consumers about their potential benefits, such as security in retirement.

Annuity product designs are too complex 63% Require extra sign-offs, paperwork, and supervision compared with other products 63% Variation in procedures across carriers 32% Over-reliance on paper-based processing 21% Lack of integration of products in platforms and financial planning software 20% Post-sale service burden on advisors 13% Slow resolution of not-in-good-order (NIGO) transactions 9% Limited online resources for advisors 8% Lack of wholesaler access and support 5% Lack of client-facing materials, such as illustrations 5% Other 12% (Image: LIMRA)

And, according to financial professionals, most of the clients are interested in learning about retirement income protection solutions and other benefits offered by annuity products—even if they don’t ask for “annuities” by name.

However, many financial professionals admit they often avoid the conversation, or in some cases steer a client in a different direction out of convenience.

It’s not that there’s an aversion to annuities in the space, but an aversion to the process itself.

In some ways the industry has come a long way, but it still seems to take two steps back for every step forward—and that can mostly be blamed on a lack of innovation.

Even while individual annuity considerations increased a record-breaking 14.6% to $71.60 billion from $62.47 billion in the second quarter of 2021, according to LIMRA, there’s still much opportunity being left on the table.

The LIMRA surveyed financial professionals to find out what they view as the biggest problems and barriers to growth within the traditional annuity sales process.

The Four Problems With the Process

Those who do include annuities in their offering tend to do business with no more than two to three insurance companies.

While at least they’re giving clients the option to consider annuity products, the choices are limited.

What’s most often holding them back from including offerings from a wider range of insurance carriers?

The process. Think: extra sign offs, piles of paperwork, hours spent on supervision.

The amount of hoops that one must jump through to sell an annuity compared to a mutual fund or an ETF is night and day.

1. No Consistency Across Carriers

If that sounds taxing, multiply those problems by the number of carriers most do business with.

If they’re doing business with insurance company A, company B, and company C, they understand each company’s paperwork requirements and specific processes.

They know who to call at each company and what they need to do to sell from each.

Attempting to open up an offering further to include a new carrier requires a lot of heavy lifting, especially given that there is no real consistency across carriers.

This keeps many from working with new carriers after they have a few partnerships up and running.

2. Can’t Easily Integrate and Assets Held Away

Another reason that many don’t typically go deeper into the annuity space or commit to expanding their annuities lineup (or why those who don’t offer annuities aren’t jumping in) is the simple fact that most carriers don’t easily integrate into the way most do business in 2022.

For example, if they’re using a wealth management platform, considering and purchasing annuities doesn’t sync easily with their own process.

When it comes to annuities, the asset, in most cases, is held away from the overall account.

When a client meets for a quarterly review, the update will often be disjointed if annuities are part of the financial plan.

The financial professional can pull up an account and show highlights of the quarter, but any funds taken out to purchase an annuity product during that time will be missing from the picture.

They must go to the carrier’s website for that information and print out a separate statement to place side-by-side with the client’s portfolio snapshot.

3. Can’t Connect the Dots

In most cases, this is stopping many from being able to deliver a holistic financial plan.

It also can make financial planning conversations more difficult.

Some are using financial planning software, and the lack of integration with carriers in this area can make it impossible to connect the dots of a client’s financial life.

Imagine running a scenario that shows a client may want to consider lifetime income or an annuity with a protection feature and the client asking, “OK, tell me more.”

However, that’s as far as the program goes, due to the lack of integration with insurance carriers.

There are no options to click on different offerings for consideration.

Instead, you’d need to take clients out of their financial plan and open a new screen with a carrier to look at annuity offerings.

4. The Post-Sales Service

While many think annuities come with a set-it-and-forget-it strategy, they’re wrong.

An advisor must continue to make sure the annuity remains aligned and on track with the client’s portfolio goals.

Not in good order is one of the biggest issues when it comes to managing annuity products within a portfolio.

We have experienced incredible fintech innovation over the past 20 years, however there are still many barriers for annuities sales, given the continued lack of integration issues between carriers and wealth management platforms.

Simplify product design 58% Move toward greater use of technology/reduce paper-based process 38% Less variation in procedures across carriers/move toward single method 28% Provide more or better client-facing materials, such as illustrations 23% Integration of products within platforms and financial planning software 23% Better online resources for customers and potential customers 20% Better online resources for advisors 19% Improve the speed of resolving not-in-good-order (NIGO) transactions 19% Reduce post-sale service burden on advisors 17% Provide greater wholesaler access and support 12% (Image: LIMRA)

Being able to fill out an app-generated PDF offers ease and convenience, but since most are not integrated on the back end to the carrier there will be no red flags if information is entered incorrectly.

When the PDF goes to the carrier and comes back due to mistakes, this causes a huge burden.

LIMRA also asked how insurance carriers can improve the annuity sales process and found, for example, that simplifying product design was a popular answer.

As we close out the final quarter of the year, financial professionals should ask themselves: “Are we leaving better options on the table for some clients because of the process?” A holistic plan should, at the very least, consider annuities and look at the full suite of options available on the market.

Whether those are fixed, variable, or other annuities products, they should at a minimum be considered.

And process shouldn’t be an inhibitor to that conversation.

Michael Kazanjian. (Photo: FIDx)Michael Kazanjian is the chief marketing officer of FIDx, a firm that aims to change the way insurance products are used to achieve client retirement goals within wealth management.





(Image: Shutterstock)


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.